Minding the store

Having the world’s biggest retailer as the state’s largest employer registers on the entire economy.

By Erin Dunn and Edward Martin

The cars in the parking lot cluster near an automatic door that glides open when customers approach. Few do this time of day. It’s not yet 6 on a winter morning. Workers retrieve merchandise from the stockroom at the back of the store to replenish shelves. Two clerks flick plastic shoes with Velcro straps, made-in-China sweatpants and other items across bar-code scanners and into gray plastic bags. Employees, for a change, outnumber shoppers.

“We’re short-handed,” one says in a clipped tone. “It makes it harder when you’ve got your own job and four or five others to do at the same time.” Her usual shift is early afternoon until 10, but some days her manager tells her to report at 5 the next morning. Her hours recently began fluctuating. Sometimes she gets as few as 31 a week, her take-home pay dipping well below $400. She’s past 60, counting the days until retirement, and in the nearly 20 years she’s done this, cynicism has crept into her voice.

“They’re trying to get rid of us long-term associates,” she says, describing what she sees as evidence — bad shifts, more work, shorter hours, intimidation. “If you want your job, you keep your mouth shut.” Before Christmas, some restive counterparts staged walkouts. Not in North Carolina. “You can’t say ‘union.’ That’s a forbidden word. You can be terminated on the spot.” An internal pay schedule reminds managers they oversee employment-at-will workplaces, meaning they can fire workers at a moment’s notice, without cause.

West of Charlotte across the Catawba River, which once powered the textile mills that drove the region’s economy, this is one of the places shaping it today. Bentonville, Ark.-based Wal-Mart Stores Inc. has 168 Walmart and Sam’s Club stores in North Carolina, with 17 more planned or under construction. Like this one sprawling over nearly 4 acres, 131 are Walmart Supercenters. The world’s largest retailer is also the state’s largest private-sector employer, a position it has held since 2002 in Business North Carolina’s annual ranking. Some 52,000 — more people than live in Burlington — are on its Tar Heel payroll.

Retailers hold four of the top 10 spots on the list, more than any other industry, reflecting a major shift in the way this state works. In 1977, the four largest employers were textile companies. When BNC published its first ranking in 1991, four of the top 10, including No. 1, were manufacturers. Only a handful are on it now. “North Carolina isn’t unique,” says Patrick O’Neill, executive vice president of the 1.3 million-member United Food and Commercial Workers International Union in Washington, D.C. “We’re becoming a nation of consumers, not producers, and Wal-Mart’s helping accelerate the downward spiral. It used to be Wal-Mart imported 72% of its goods. Now that’s about 90%. It’s a race to the bottom, and they’re responsible for a lot of the off-shoring of jobs you see in North Carolina.”

O’Neill, whose union hasn’t been able to breach the chain, is no fan. But even critics concede that Wal-Mart sells goods at low prices and provides jobs for the elderly and those with few skills and little education. Wages for its full-time employees in North Carolina average $12.73 an hour, a spokesman says. (The estimated state average hourly wage was $19.83 in 2012, according to the N.C. Department of Commerce.) The chain spent $6.7 billion last year with North Carolina suppliers and donated $33.2 million to charities. The fragmented schedules and sporadic hours that some dislike attract others, and its size gives it flexibility. In Cary, personnel coordinator Bessie Pickett, who has worked there 19 years, says, “My husband died of a massive heart attack, and they gave me a week off. They were really understanding.” Still, she adds, “it’s changed a lot since I came here, and a lot are resistant to change.”

“Individuals who go there to work have to realize what a Wal-Mart job is going to be,” says Michael Walden, an economist at N.C. State University in Raleigh. “Many are students and part-timers with no intention of staying. Other stores are like that, too. There’s a young man at the gym where I work out who’s part-time at Target, while working on his degree. It fits him fine.” Once, retailing was characterized by department stores such as Charlotte-based Belk Inc. that provided not just a job but, for many, a career. That’s fading. Between 2010 and 2020, a state report forecasts, North Carolina will lose more than 5,700 department-store jobs, the most of any business segment listed. Adding nearly 24,000 jobs, superstores and warehouse clubs will be among the biggest gainers.

Wal-Mart, founded by Sam Walton in 1962, opened its first store in North Carolina in 1983 in Murphy — with its strategy of contiguous growth, the chain entered the part of the state nearest its Arkansas home — arriving when old-line factories still dominated the workplace. Its homey advertising struck a chord in mill towns: We sell American goods, including those you make. By the time Walton died in 1992, his empire was shedding its small-town ways and about to explode into a global giant that inserted itself into lives of workers — its own and others’ — in ways both obvious and obscure. By sheer size, it influences wages and working conditions of its competitors and other retailers. “Wal-Mart sets the pattern,” says James Andrews, president of the state American Federation of Labor and Congress of Industrial Organizations, which represents about 150,000 North Carolina workers, but not Wal-Mart’s. “They say, ‘We’ve got to model our operations after Wal-Mart if we’re going to stay in business.’”

“At least jobs in textiles, furniture, tobacco were stable,” says Gene Nichol, director of the Center on Poverty, Work and Opportunity, part of UNC Chapel Hill’s law school. “You didn’t get rich, but it was a living wage. Now they’ve flown.” For those lucky enough to land one, a manufacturing job still tops most of those in retailing and many other segments of the service sector. In the last 11 years, factory wages increased more than 40%, reflecting fewer but more highly skilled jobs. As Walden notes, “Manufacturing is becoming more productive, a shift out of labor and muscle power to machinery and technology. But we’re still more of a manufacturing state than the nation as a whole — 23% of our gross domestic product comes from manufacturing, compared with 13% for the nation.”

Those jobs are becoming scarcer. During those 11 years, a tough economic period bracketed by recessions, retail employment in North Carolina dropped only 2.5%, to 447,378, while manufacturing nose-dived 42.7%, to 434,698, sagging below retail for the first time, according to the U.S. Bureau of Labor Statistics. Pay stubs show retail workers have no reason to gloat. In the same period, their wages rose 16%, roughly half that of workers as a whole and barely a third the increase of those in manufacturing. Some call that the Wal-Mart effect, the high cost of low prices. Retail’s reliance on part- and short-timers has coined a term in employment annals: pass-throughs, disposable workers.

“Any business has to make a decision about its labor,” Walden says. “One is whether to have an environment that motivates people to stay longer, because retraining workers is expensive. Or, you have to ask, is it a job where training is low-level and minimal? If so, companies figure they don’t lose anything by having employees pass through. I’m sure Wal-Mart knows its turnover rate and could do something about it by increasing pay and benefits. But my suspicion is, it knows that and is getting the workers it wants.”

Glancing around her, the longtime employee at the superstore west of Charlotte — who spoke only on condition its location and her name not be revealed — knows few of her co-workers. “The reason people like me stay is, we still care. The new people, they just show up. Sometimes, after they see their first paycheck and how hard they worked for it, that’s it — two weeks and they’re gone.”

In Columbus County, where the sandy soil grows pine trees and tobacco, and the latter not so much anymore, the rural crossroads of Nakina sits on N.C. 905 within 10 miles of the South Carolina line. Some days before dawn, Karla Pirko is behind the wheel of her car, driving to work at a Subway fast-food restaurant nearly 30 miles away in North Myrtle Beach. There by 5:45, she preps the day’s bread for baking, sets up the serving line, takes inventory, begins brewing coffee and unlocks the door at 7.

Unlike her Wal-Mart counterpart 200 miles away in the Piedmont, Pirko, 32, has most of her working life ahead of her and is upbeat though realistic about her job: “We’re all smiles here, and we work really well as a team.” She’s making a Herculean effort to break the low-wage cycle, pursuing two majors — agricultural biotechnology and environmental science technology — at Southeastern Community College in Whiteville. She sometimes dreams of landing an outdoor job when she finishes this fall, perhaps as a game warden or with BASF Plant Science LP, part of the German agricultural-chemical company that has its headquarters at Research Triangle Park

It’s Pirko’s second chance at school. She was attending Southeastern when she married at 20 and had her first daughter, followed by a son three years later and another daughter four years after that. Her marriage fell apart. She had taken a job at Subway nine years ago and, six years later, became a manager, eking out time for her family while living with her parents in Nakina. Slowly, a realization set in: In her best year, working 50 to 60 hours a week, she had earned about $25,000 — barely above the federal poverty guideline for a family of four. The next step up, to district manager, seemed unlikely in the foreseeable future. In the summer of 2011, she called her boss. “I need to go back to part time,” she said. “I’m going back to school.”

She now earns about $8 an hour and works roughly 30 hours a week, plying the roads between North Myrtle Beach, Nakina and community college in Whiteville, helping her children with their homework at night before settling in for her own and a typical five hours of sleep. Her instructors say she’ll succeed, but for thousands of others, climbing up from poorly paid service work will prove too daunting. It’s not always a matter of motivation. Some reasons are embedded in business models of the new workplace. Others are a matter of geography.

Columbus County typifies the struggle of small communities. Its unemployment rate lingered at 11.6% in November. Twice in the last 18 months an industrial site at the border of Columbus and Brunswick counties was passed over for projects that would have created hundreds of good jobs — first by Fort Mill, S.C.-based Continental Tire North America, then by Peoria, Ill.-based Caterpillar Inc. Retail workers narrowly outnumber those in manufacturing, but the county’s average manufacturing job paid $56,498 in 2011, more than 2½ times the $22,079 retail workers earned. Urban regions are more likely to attract jobs because of their size, according to a 2011 workforce report. Only 40 of North Carolina’s 100 counties are in metropolitan statistical areas, but they account for 71% of the state’s population and 76% of its jobs. That leaves Anne Bacon, senior director for workforce development at Raleigh-based North Carolina Rural Economic Development Center Inc., with an uphill climb. She spearheads programs that try to keep younger generations in rural counties and to employ laid-off and underemployed workers in new fields. “The challenge is not just finding a job but having a career pathway or having career lattices to move between industries.”

In other ways, too, the new workplace seems to conspire against those like Pirko. “Curiously,” says Nichol, who heads the UNC work and poverty center, “North Carolina is still growing by immigration. Not illegal or legal but people moving here from other states, even in hard economic times.” Economic refugees are often from the Rust Belt and other depressed regions, flooding the potential low-wage labor market and competing for fast-food, pass-through retailing and similar jobs. “It’s making it harder for families to make a living wage.” Immigration has inflated the state’s unemployment rate, says Mark Vitner, a Charlotte economist with San Francisco-based Wells Fargo & Co. At 9.1% in November, it was the fifth highest in the nation, behind only New Jersey, California, Rhode Island and Nevada. “We were hit very hard by the recession, and there are a lot of old-line, labor-intensive industries that were hit very hard. Our labor force is growing faster than the nation’s is.”

Politics also enters the picture. Bob Rucho, a Matthews Republican who co-chairs the N.C. Senate’s powerful finance committee, touts tax reform as one tool to help the state reshape its workforce (page 20). “There is a huge shift from manufacturing to service. Service does not have the same economic multiplier effect as manufacturing.” Taxing services — or consumption — more than production will help the state grow and attract businesses, he says. With new Republican Gov. Pat McCrory and GOP majorities in both the House and Senate, tax reform stands its best chance of passing in years.

However, a change in unemployment benefits to help make up the state’s unemployment-insurance debt to the federal government could flood the marketplace with more low-paid workers. Pushed by the state chamber of commerce and business interests, pending legislation could by July cut state unemployment benefits by a third — decreasing duration from 26 to 20 weeks and shrinking the top amount from $525 to $350 a week, closer to the present $290 average. “You’re saying to workers, ‘After the first couple of weeks, you’re going to have to take a job — Wal-Mart, Burger King, Hardee’s or whatever, I don’t care what it pays,’” the AFL-CIO’s Andrews says. “We all understand the value of early return to work, but we’re saying to employers, ‘We’re going to increase the number of workers who’re going to have to go to work for you, for minimum wages, saying nothing about benefits.’ With this kind of workforce, what impact will it have on family life? Our children? Education?” Not to mention taxpayers.

A few weeks before Christmas, a crowd gathered outside a Walmart in Durham. Rather than employees, they were sympathizers from churches and social-action groups. They chanted, and some carried signs that read: “End the retaliation and stop trying to silence those who speak out” and “Always low wages,” a play on the chain’s advertising slogan. Wal-Mart had filed a motion with the National Labor Relations Board to block protests by workers over wages and working conditions. Though those employees were not members, they were supported by O’Neill’s Food and Commercial Workers union. Labor leaders contend that Wal-Mart workers are paid so poorly that a high percentage receive some kind of public assistance. (The company spokesman says he has no way of knowing how many do.) “Not only are stores like that making record profits,” Andrews says, “we’re all subsidizing them, whether we shop there or not.”

Darkness has just covered Taylorsville, a small town nestled in the foothills between Hickory and North Wilkesboro. Catherine Watts, 20, is back inside her family’s 200-year-old farmhouse in Alexander County after gathering fuel for the wood stove. She has been busy buying Christmas presents, studying for exams at Wilkes Community College and working a shift at her part-time job with Framingham, Mass.-based Staples Inc.

Her dad drives a concrete truck. Her mother is an office assistant. “Being raised, we didn’t have much money. We’ve struggled a lot with bills and getting by and having food. That’s another reason we grow a garden.” Her family is her motivation. “I want to make something of myself. I don’t want to struggle the way I’ve seen them struggle. I want to sustain myself. I want to help them out. I want to buy my dad a truck and my mom a car and pay off the house.”

She juggled a second part-time job with Charlotte-based retailer Cato Corp. until being passed over for store manager and now works just 10 to 15 hours a week for minimum wage, which barely covers her gas, car insurance and cellphone bills. Though a people person — “I could sell you a dead bug, and you’d hang it on your wall” — she doesn’t see a career in retail. She hopes to transfer to Appalachian State University in Boone in the fall and study to become a bilingual pharmacist.

People like her see the writing on the wall and are flooding the state’s community colleges. Enrollment is up 28% since the recession hit, says Scott Ralls, the system’s president. Middle-wage jobs that don’t require higher education are becoming a thing of the past. “The good news is if we look over a four-year period of time, last year we had 60% more graduates in what I would call our tech areas — engineering, technicians, industrial, construction and chemical. So many people who come back into programs have been laid off.” He adds: “I think what’s different now is we thought of students going one way or the other — working with your hands or your head. Those either-or days are gone. They have to have practical, contextual understanding, undergirded by good skills and communication and with a comfort level in math that wasn’t required in these manufacturing plants.”

It’s a trend that has hit the state’s entire workforce. Of the 20 fields predicted to grow most in North Carolina between 2010 and 2020, six are related to health care, according to a 2011 study by Moscow, Idaho-based Economic Modeling Specialists Inc. Management consulting, computer-system design, commercial banking and wholesale trade are also expected to add jobs — though so are temporary-help services and restaurants. “We’re always going to create a lot of jobs in low-wage industries,” says Vitner, the Wells Fargo economist. “I don’t see a problem with the low-wage jobs in themselves, but we need to make sure we have opportunities for people in low-wage jobs to upgrade their skill sets and get higher-paying jobs.”

In the tiny crossroads of Nakina, that’s what Karla Pirko is doing. Sunday is for her kids, for kicking through the fields of her family’s 40-acre farm, visiting the beach, watching movies. “I’d like to help them out, like my parents have helped me,” she says. “I’d like to save up for them to go to college, to have a better future.”